Lender is not entitled to attorney fees in New Jersey

Lender denied attorney fees in Foreclosure Suit in New Jersey

SPENCER SAVINGS BANK, SLA, PLAINTIFF-APPELLANT, v. WALTER SHAW AND CAROLE SHAW, HIS WIFE, DEFENDANTS-RESPONDENTS.
DOCKET NO. A-6338-06T2

Case Law
SUPERIOR COURT OF NEW JERSEY, APPELLATE DIVISION
401 N.J. Super. 1; 949 A.2d 218; 2008 N.J. Super. LEXIS 114

April 2, 2008, Argued
May 28, 2008, Decided

Facts: The mortgagors defaulted on their loan, and the bank sent them a notice of intention to foreclose (NOI). The mortgagors paid the past due principal and interest, but not the attorneys' fees and costs the bank demanded. The bank then filed the instant foreclosure action. The trial court held that the bank was not entitled to the attorneys' fees and costs it incurred during the interim period between the expiration of the right to cure as set forth in the NOI and the commencement of the foreclosure complaint.

Issue: Is the bank entitled to attorney’s fees?

Ruling: No. It concluded that the New Jersey Fair Foreclosure Act, N.J.S.A. §§ 2A:50- 53 to -68, did not permit a lender to recoup from the debtor attorneys' fees and costs incurred between expiration of its notice of intention to foreclose and the filing of the foreclosure complaint. Under N.J.S.A. § 2A:50-56(c)(6) and (7), until the foreclosure complaint was filed, the lender was not entitled to make the debtor legally "responsible" for the payment of those costs and fees. Further, R. 4:42-9(a)(4) explicitly provided that no fee for legal services was allowed except in an action for the foreclosure of a mortgage.

Lesson Learned: N.J.S.A. § 2A:50-56 of New Jersey Fair Foreclosure Act, N.J.S.A. §§ 2A:50- 53 to -68, sets forth the mandatory requirements of the lender's notice of intention to foreclose (NOI), which includes a minimum 30-day period during which the debtor can cure the default to avoid initiation of foreclosure proceedings. N.J.S.A. § 2A:50-56(c)(5). The NOI must also advise the debtor that if he does not cure the default by the date specified, the lender may then, under § 2A:50-56(c)(6), take steps to terminate the debtor's ownership in the property by commencing a foreclosure suit in a court of competent jurisdiction.

Written by Kevin Levonas and Jerry L.